Struggling handset maker
launched a line of next-generation phones Tuesday, in a bid to stay afloat in the wireless business.
The company unveiled five new phones, as well as several wireless PC data cards and a collection of music and photo-taking accessories in 30 regions across the globe.
Yet analysts expressed caution about the launch, given the intense competition in the wireless handset market.
"Getting some new handset models on the market should help the company strengthen its market position,
but in a market that's
only growing 10%
this year, it's going to be tough to grow market share," said W.R. Hambrecht wireless analyst Peter Friedland. W.R. Hambrecht has no investment banking relationship with Sony Ericsson.
Gartner Dataquest wireless equipment analyst Bryan Prohm agreed. "These new handsets are clearly not enough, in terms of quality or quantity, to make a substantive difference in
Sony Ericsson's share position during 2003," he said. "Most of their key competitors are going to have products of a similar ilk, and at a far lower price."
Sony Ericsson was conceived in 2001 as a 50/50 joint venture, under the thinking that by merging the handset operations of one of the world's largest electronics companies, Sony, and the world's largest wireless telecom gear maker, LM Ericsson, the deal would improve each other's lagging handset sales.
At the time, critics argued that joining the two ailing units exacerbated the problem. Indeed, the company's performance so far has provided some support for that theory. Since its launch in October 2001, Sony Ericsson has given up market share to its peers. By last year, it had slipped to the No. 5 spot.
As of the third quarter of last year, Sony Ericsson phone sales had fallen 30.4% from the third quarter of 2001, while
sales had improved 13.5%, according to a Gartner Dataquest study. The venture's market share stood at 4.8% in the third quarter, according to the same study.
In the third quarter, Ericsson executives hinted publicly that the company might pull the plug on the venture. By the end of the fourth quarter, however, the venture appeared to be recovering slightly. In the fourth quarter, phone sales by unit improved 4% on the year to 7.1 million phones, giving the company an estimated 6% market share. Total sales improved 18% to 69 million euros
$75 million from the year-ago period. The venture's moderate improvement encouraged Sony and Ericsson to commit another 300 million euros to the joint venture in January.
Executives are hoping that a snazzy lineup of new phones could help it capture back some of the old magic, when it held a solid No. 3 position with 15% market share, not far behind competitors Nokia and
In an interview, Sony Ericsson's corporate vice president of marketing, Philip Vanhoutte, said the firm's target this year is to improve its market share to 7% to 10%, which will help it reach break-even by the end of 2003. Vanhoutte said the U.S. market is especially tough for the company, as Wall Street places a strict emphasis on bottom-line results. But he added that the two phones geared specifically toward the U.S. CDMA networks mark only the beginning of its strategy.
Separately, the company reiterated concerns that it expects to see pressure from the average selling prices of phones, even as it rolls out pricier units. In the first quarter of this year, Nokia told investors it saw a worrisome trend in the market, as consumers snapped up cheaper handsets amid an uncertain economy. We will see a "dent in
average selling prices going forward," said Vanhoutte. By virtue of their low volume, "Smart-phone sales will not offset the impact on
average selling prices."
The venture's new line released Tuesday includes a successor to its flagship T610, which features a built-in camera, color screen and the ability to download software games. The launch also marks the North American debut of the P800, the company's first handheld computer phone based on the Symbian operating system. The company also launched two new phones designed specifically for the U.S. market's dominant wireless standard, CDMA.
Ericsson American Depositary Receipts slipped 17 cents, or 2.6%, to $6.26 in late trading, while Sony ADRs sank 27 cents, or 0.7%, to $37.67.